The Economist explains

Who are the "squeezed middle"?

POLITICIANS love to talk about the middle. Barack Obama has said he wants an economy that grows "not from the top down but from the middle out". David Cameron promises that his government will support Britain's "strivers". The fashion has spread beyond the rich world: last year's election in Mexico saw much talk of the new clase media. But defining these categories is tricky: in a radio interview in 2010 Ed Miliband, the leader of Britain's Labour Party, stumbled over his new catch-phrase—“the squeezed middle”—when asked exactly who was in it. Despite the ridicule that this attracted at the time, the description is now commonplace, and is likely to be a feature of the run-up to Britain's 2015 general election. So just who is in the middle, and what is squeezing them?

When talking about the squeeze, most commentators refer not just to those exactly in the middle of the income distribution. They tend to take in those who are neither so poor that they depend overwhelmingly on government handouts, nor overtly prosperous. The Resolution Foundation, a British think-tank that has led the debate on stagnant wages, has concentrated on the 40% of the population that earns less than the median wage but more than the bottom 10%. This group, it argues, has particularly suffered from the stagnation of wages and the withdrawal of in-work benefits in recent years.

The plate tectonics of the labour market are responsible for the squeeze. In the early 2000s, in both& Britain and America growth and wages peeled apart. The economy kept growing, but median earners did not feel the benefit. Partly, this was a product of globalisation; the share of new wealth going to employees (rather than shareholders, or back into companies as reinvestment) declined as the quest for profits intensified. But the decline of “middle class” jobs is the most important explanation. On both sides of the Atlantic, automation and outsourcing have destroyed administrative and, particularly, blue-collar industrial jobs. The recent bankruptcy of Detroit is a revealing example of the shift. These jobs were relatively well-paid and secure. Some of those who lose their jobs successfully retrain and join growing service-sector industries as well-paid professionals. But others struggle to do so, and find insecure, low-wage jobs at the other end of the service economy, as call-centre workers or cleaners, for example. So while the overall economy keeps growing, the rewards increasingly accrue to those at the top, and wages for those on low-to-middle incomes stagnate relative to prices.

So what is to be done about the squeezed middle? In the past, politicians mitigated mediocre incomes with cheap debt and benefits. The deregulation of the mortgage market in America—which led to the growth of sub-prime debt that helped to create the conditions for the 2007-08 credit crunch and ensuing downturn—was a classic wheeze to make those on low incomes feel better off than they really were. In Britain the Labour government supplemented low pay with tax credits—by 2008, Leviathan was slipping the "middling" 40% a top-up worth 3.7% of national income every year, the Resolution Foundation calculates. A more sustainable solution might be to support the vocational training and high-tech start-ups that create good, new middle-class jobs. Vocational and technical skills in Britain and America lag behind those in economies such as Germany and Sweden where, not coincidentally, the middle is looking rather less squeezed.

Thank you, no need for a lecture. Most European countries have like America two main parties and some lesser ones. Of the main parties one is as a rule pro capitalist in brackets, the other socialist.
Both parties have accepted that fact and stay as a rule within the parameters that both can accept and live with. You can call that an intelligent compromise.

But, Reynard, I probably live down the street from you. I also am non-US resident but the 'shrinking middle' is a global institution.

Now that Obama, Cameron, Harper, Merkel are going to St Petersburg for their annual G20 conflab in a fortnight, could be something they get their teeth into.

To steer them in the right direction, civil society advising the G20 (C20) has produced a nice little reader 'Civil20 Proposals for Strong, Sustainable, Balanced and Inclusive Growth'.

Ntw if you're from China, France, India, Korea, etc because there's a chapter for your country too.
I'm suggesting you muzzle the Rottweiler as the Germans/Russians propose different solutions for their 'shrinking middle classes'.

Sputnik led to a lot more attention to education. But it was most to increase the emphasis on science and, at the college level, engineering. See, for example, the "California Master Plan for Higher Education" from 1950.
.
But attention to the kind of training that makes one a better mechanic or plumber? Not that I noticed at the time -- and I lived thru it as a school child.

And Ebdebebbede... You are right... We are all in it together... And a homemaker allowance is as relevant to China and Chad as America and England
..
Which is the more efficient?.. Men and women (and children) fighting over the few good jobs available... some households with several jobs, others with none... high house prices, low real wages, and massive debt... Or men prioritised for the frontline work with women back in support
..
A pool of housewives available for part-time work with no benefits would provide the economy with a low-cost labour base with no immoral exploitation... Their benefits would be covered by their breadwinner/husbands
..
We are agreed however that single-income households are the way to go... if only, like Saudi Arabia, we can afford them

Hate to be the one to break it to you (actually, I don't... ) but your continuous "it's their fault for not saving every penny and living the ascetic life." BS is just that, uninformed BS. Some people live beyond their means, as do people in *every* income bracket, but sterotyping them all as "keepin' up with the Jones'" is just ignorant.

And in this particular example, if he earns the average at the plant, $125k/year, then they were hardly living beyond their means.

I said Obamacare was President Obama's proposed solution to the pre-existing problem. Unfortunately, President Obama's "solution" follows the same destructive pattern as every other liberal initiative by placing new taxes on the American middle class and pouring more money into unproductive entitlement programs. This has been the regulatory status quo since the late-60s.

Altogether, it looks like more than 1,000 workers will be pushed out of their jobs, losing generous salaries that will be nearly impossible to match elsewhere in the region. The McCracken County plant was one of the area's largest employees, and the average salary for plant workers, including benefits, was $125,000.

Barry King, a 56-year-old chemical operator at the plant, said he checked out a job fair recently. He left with a pile of brochures but no certain prospects. He said he might attend a technical college to get retrained.

(A little late in the ballgame. Speaking of which.)

"What hurts us most, we can survive because we're older, but our kids, they've set up this life working at this plant," Myers said. "They're not going to be able to maintain the life they've got when that plant goes away."

His son's 13-year-old daughter plays on a traveling softball team in hopes of landing an athletic scholarship to attend college. But the family's $400 to $500 weekend excursions to watch her play may come to an end if her father loses his job, Myers said.

"We feel like our life has gone down the toilet," he said.

(Because they can't spend $500/weekend instead of saving it?
I was lucky when my father had a day off from his 2nd job to watch me play LOCAL tee-ball/Little League.)

How much misrepresentation occurred with underwriting mortgages though, by the issuers of the mortgages?
`
What percentage of subprime mortgages should have been Alt A; and what percentage of Alt A should have been a higher grade mortgage?
`
What percentage of mortgages failed to conform to regulations of the day outright?
`
As to the credit crunch and financial debacle, how much active, premeditated misrepresentation occurred in securitization, and in distorting the ratings of instruments?
`

That leaves domestic workers unprotected, and less revenues for the Federal Gov't from income taxes of the workers and import taxes - leading to deficits - if said country expands the military in order to protect the export nations.

Single-income couples are perhaps the least effective way to raise children. Let's say that all families have two children. This means that during the day one person takes care of two children (when they are not in school). I would say that one adult could easily raise three or four children as well, as long as the children aren't toddlers.

Another point is that this model would inevitably lead to more and more women staying at home. I would prefer that girls would have independent, strong women role models that are not dependent on their husbands handouts. The role models do not have to be their mothers as every family's situation is different but in general the sentiment in society should be that women work as well and as much as men do.

If you come down from your ivory tower, you can read our federal budget, and you'll see why Americans have lost faith in socialism. In the USA, the "socialists" have simply stripped away middle class productivity entitlements and promised them to other demographics. If that weren't disheartening enough, they've been raising employment taxes which has put many of us in debt and out of work. Naturally, this has lead to trickle-up poverty, a phenomenon they refuse to acknowledge, even at our present juncture. This is actually the second time we've reached this state since adopting "socialism". Stagflation was the first.

Americans don't have a populist socialist movement b/c we have no socialists. We have a group of moral philosophers who never let a good "social injustice" get in the way of macro-economic data or constitutional concerns. Another group of "socialists" are actually middle-class capitalist laborers who hate the labor market and who believe extortion is a legitimate means of raising wages.

Someone should send you and your fellow socialists back to economics class. Maybe that could be our new 'vocational' training. The United States, even adjusted for PPP, has a much higher per capita GDP than every Scandinavian country except oil-wealthy Norway. The wealth that our richest people possess isn't some adjustable share of a fixed national pie. It is created new wealth, that wouldn't exist without the efforts of those people. We're talking about heavy-hitters at Google, Apple, and Facebook, for example. We're also talking about fracking entrepreneurs, surgeons, even small business people.
.
We should discourage wealth creation just because it's not going to the kind of people that you would like it to. We're in a new globalized economy, and wages are going to follow their own logic. Attempting to fight it is only going to make things worse, as we see in countries like France and Spain.

Thats a symptom across the west. It is more attractive to have jobs in non-contributing work, that actually just "siphon/steal" value from the ones who actually produce, than have a job where you actually contribute to society.

Better to be a financial wizard as you say, then to be an engineer or teacher.